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this is fareed zakaria. welcome from all over. i'm fareed zakaria. the state economy. i was the topic of this week's presidential debate and be deciding week of the election. we're often told we need to get businesses to start investing and hiring. well, we have three powerhouse ceos on the show. lloyd blankfein of goldman sachs, andrew liveris of dow chemical, and john chambers of cisco systems. next, 11 years after 9/11, do we have to worry about al qaeda again? i'll talk to the former cia chief michael hayden about the aftermath of the benghazi attack. and salman rushdie hiding after a threat was placed on his life. also, if china's growth slows, should the rest of us cheer? no. i'll explain. first, here's my take.
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sometimes convention wisdom is right. minutes after the debate, the pundits declared mitt romney the winner. he was. he seemed engaged, forceful, punchy. obama seemed passive, detached, and glum. but what's more significant than how romney said things is what he said. romney repeatedly insisted he was not advocating a big tax cut. in fact, he declared unequivocally that he would not cut taxes at all if they added to the deficit at all. now, as "the washington post" reporter checks out, for two years romney has been campaigning on a tax cut that would cost around $5 trillion over ten years. romney said he would eliminate deductions and cut spending to pay for it. he never offers details. he did say he would cut funding for public broadcasting which
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was 0.01% of federal spending in 2012. medicaid was 0.13%. romney also spoke in favor of regulations including much of the dodd/frank bill and he repeatedly held up as a model his health care plan in massachusetts which has added center the individual mandate and on which obama care is based. romney's transformation did not happen overnight. the candidate has been reworking his stump speech. in a very smart analysis, npr pointed out romney has a five point stump speech. the first four points are actually identical to obama's stump speech. two, domestic energy, three, retraining programs, four, domestic. -- deficit reduction. on five they differ. i've long argued that romney is an intelligent man trapped in a party that has forced him to embrace extreme and impossible
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positions. one of his advisers had predict thad once the republican primaries were over, romney would erase the image from the primaries and like an etch a sketch just draw a new one. well, he appears to be doing just that. the republican party might hate obama enough and be frustrated enough to let him wink and let him do it. if so he faces something far more challenging than a good debate never the last weeks of the campaign. he faces a moderate republican. let's get started. america's biggest corporations have a unique perspective on the economy. i recently had an opportunity to talk to the heads of three very different, very successful businesses in finance, in manufacturing, and in technology when i chaired the panel for the clinton global initiative. they are lloyd blankfein, the
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chairman and ceo of goldman sachs, andrew liveris, the president, chairman and ceo of dow chemical, and john chambers, the chairman and ceo of cisco. the conversation was fascinating. listen in. lloyd, let me start with you. when you look at the global economy, right now, you know, what is it, four years after the crash, what does it look like to you? >> well, we're definitely in a muddle-through phase, slow growth, very disappointing. but i think one of the things that was achieved -- and by the way, in hindsight it may look small but while we were living through it, it was very large. there was a substantial chance too substantial to live with of things falling off the rail. they're still out there, and a lot of the things that would foster growth are still uncertain and are still, you know, frankly they're still in the forward. but i think what was taken off the table recently by the --
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frankly by the central banks acting by themselves and less by government through fiscal policy was the real blow-up risk. so if you think of a couple places in the world that we were the most afraid of like europe, i think the actions of the ecb to at least defer the problems with the sovereigns and the bank issues in europe, if they use this time to fix the problems, we'll look back and think it's a good thing. if they deferred them, made them worse in the long term, we won't feel that way. i think something similar has happened in the united states whereby a lot of liquidity has been provided by the central bank. >> andrew, you have operations throughout all of the world. what's your sense of growth? there are troubling reports about growth slowing down which so far have been a very powerful lifeline for global growth as united states and europe weakened, particularly china where you do a lot of business.
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>> i don't think we're going have an '08/'09 scenario out there for the reasons lloyd was addressed. i do think the world since '08/'09 to now has not gotten to normal. of course, the obvious, which is consumption in the u.s., is not where it was. what's replaced that is government stimuli around the world that has been effective in the main. the first chinese one was very effective. the situation in china right now, i would say, in the industrial b to b world, they're at, in my view, somewhere in the 2% range of growth. not 6%, not 7%. that's an industrial engine. thousands and thousands of small mediums are having trouble. our supply chains are weak. and, of course, the slow motion train wreck that is europe and if i could be optimistic there, let's say they're on the rails again.
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they just need people to drive the train. maybe i can finish my run around the world with the one optimistic place that we should be thinking very positive about, which is the united states. we have a strong hand right now. our political process is not allowing us to play it. capital is a coward. businesses hate uncertainty. we have uncertainty even in this country on things that matter. not the least of which being our phenomenal energy position, which i can talk about more, if you wish. maybe the u.s. can get its act together, depending on whoever the president is and the businesses and government can work together to finally get things going. >> when it turns to technology, the hope is that somehow you guys will magically bring us out of all of this, that technology is going to be the thing that gets the american economy moving again. if we are to look for the next drivers of growth, do you see them in technology?
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>> i absolutely do. and if you really look at the opportunities, you go around, at least my colleagues do. we see the picture remarkably similar. if you look at europe, you not only see the weakening economy, but we also said in our last reports, the spending on capital drops a lot, same with the job creation. i do not think asia-pacific will be as aggressive. as we hoped they would be, in china and india. i am optimistic on china, been there 25 years. they always find a way to get through. the common take away, the u.s. is known for entrepreneurial spirit, and unfortunately it has to be the country that leads out this time. we just do not see the engines in other places. but i think technology combined with a great education system and government and business really working together and i think this is what we're missing around the world, a model like as what occurred in the uk or canada or russia might be something we can learn from, but i believe it's the u.s. leads us out. >> wait. follow up on that.
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you say government business cooperation is what we need. the kind we have in the united kingdom, in canada, and even russia, you find it easier to deal with putin's russia than the united states? >> you are a pro at this and so no matter which way i answer this, i'm in trouble. to that point, each of those leaders understand technology creates jobs. each of those leaders know if you're an extraction leader live russia, you've got to create stability, keep your young people at home. create new jobs, et cetera, and they're willing to work closely in public, private partnerships to create this. >> so how badly did we do in the u.s.? when you can contrast your dealings in washington with your dealings in london, canada, russia, what's your conclusion? >> i think we have a country that dreams well. i think we've got to be more
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effective on execution. you have to look at the positives. any time you feel down, go to silicon valley. the ability to dream in the valley is amazing and they make dreams happen. but there's a risk-taking culture that you must have to be successful in countries an companies. >> we'll be back in a moment. more with these three top ceos, their optimism and pessimism about the future. right back. [ male announcer ] citi turns 200 this year. in that time there've been some good days. and some difficult ones. but, through it all, we've persevered, supporting some of the biggest ideas in modern history. so why should our anniversary matter to you? because for 200 years, we've been helping ideas move from ambition to achievement. and the next great idea could be yours. ♪
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sachs, andrew liveris of dow chemical, and john chambers with cisco. how does the future look to them? >> lloyd, the biggest immediate danger for the u.s. economy and therefore the global economy is the so-called fiscal cliff. >> uh-huh. >> how real is it and how do you prepare for something like that? >> you know, it's real. the numbers are there and the law is cast, and the math the economists have defined and this seemed to be the consensus, this can be 4% of gdp, i think it was meant to be somewhat of a ticking time bomb to prompt action. i don't think anybody is going to be pleased if it doesn't produce action. obviously people have written off the period up to the election and put their faith in lame duck session to do some work. i don't think a lot of work can be done, maybe at the most optimistic there can be some rejiggering, rearranging,
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redeferring. but if they got something done, medium hanging fruit and then said we have a structure in place and maybe by the middle of the year we come up with a whole program and set ourselves a deadline and agree to work together -- and i'm somewhat optimistic of after the election, regardless who wins and where the compromise is set, people who have been pouting for 18 months and holding their breath aren't going to do want to do that for the next four years. there will be some confidence moving that out. this gives me optimism. you know, this wasn't supposed to be -- the timer was set. it was supposed to prompt action. and we made, there's substantial risk that we don't get action, and that will be very, very bad for the rating, and it won't just be because of our credit, it will be because of dysfunctionality of the
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government, and we will deserve to be graded as a dysfunctional government and who wants to lend money to a dysfunctional government and why should we be the reserve currency of the world if we can't manage the health of the company and therefore the value of the currency is. u.s. is an amazing beneficiary. of being the reserve currency. i think people should realize that's the ticking time bomb. >> andrew, you operate around the world. would you say the dangers or the problems of investing capital in the world have gotten worse? >> they're in a stormy period where the voice of business needs to elevate to meet the voice of government and do it as a partner. i think it falls on us. when i'm in front of our factory workers and we talk about the pride thanks to american entrepreneurialism and innovation, i'm not an american but i think this country has nailed it. in terms of human history, putting the right model in place. we should allow ourselves some faults. we should allow ourselves to
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not complain it's just politics. equally politics has to get way from this notion that we have a four-year or three and a half-year election process, which is a joke. a whole year, this year of doing nothing, which is, in essence, what we've got. we have got jobs council report, manufacturing report, lots of work on the financial side, all sitting there in inaction because we can't get a white house and congress to agree on fixing the problems of the day. >> you're on several of president obama's -- >> i'm on several of those. i look at me when i saw all this. >> i want to ask you a different question. >> yes. >> what do you think of president obama because you are a business leader who's actually worked with him. >> is this going to get me deported? >> depends on the answer. >> look. we serve this country. we serve this president. i'm proud to serve this
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president. i am proud to serve a president that follows this president. if it's the same president, great. >> john chambers, you have lavished praise on president clinton. publicly and privately. >> it's hard for a republican. he's done the best job during my lifetime. >> goldman sachs was the largest contributor to obama's campaign the last time around. i'm guessing that's not the case this time. has that surprised you? why has support for president obama dropped so dramatically in the financial community. >> just to clarify, goldman sachs doesn't contribute to the campaign. >> individuals within them. >> we're a mixed bag. we were also a big contribute to republicans four years ago and to democrats this year. i think it's certainly been a shift. there's been a disappointment
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owing to some of the things that have been described and working together. you know, risk taking is not just the risk we take and not just financial risk. the environment has gotten such a got you environment that even the politicians themselves and regulators have to do their business with one eye over the shoulders for fear of being dragged into some congressional committee or they'll be exposed for having to talk to leaders. so i think this idea of working together, i think in order to allow people to work together, there has to be a little bit of a letup. another thing is you can't kill people if everything doesn't work out perfectly. who the heck is going to take the jobs in business and government. you'll always get people that want to be ceo and senator and cabinet secretaries, but it might not be the people you want if you make it so punishing for them to take the job and
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unsustainable to be in the job because who gets it right all the time? >> that's actually an important distinction. john chambers and i were talking about it. in business, you take risks. some of them work out. some of them don't. in government, it's very difficult to take risks because if something goes badly, you're going to get pilloried for it. there's no particular reward for having gotten it right. so the balance you worry about is very different, right? >> it is. business has an advantage that we know if we don't take risks, it's about survival. we have a great number of competitors every year. what's been interesting, those from 15 to 20 years ago are no longer there. from 10 to 15, only one survived. it's a culture that if you don't change, you will hurt your employees, you will hurt your customers, you will hurt your shareholders. this is where i think business has to stand behind government leaders that take risks and
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encourage the country and every country around the world, if governments don't take risk especially in tough times, we talked earlier about that's what it is about, not leading in good times, getting the turn around to take place, and to do that you have to take risk. then come together whether europe, the u.s., china behind common risk taking. the chinese take risk, the canadians will take risk. i think we have to do the same here. >> since i have you here, john chambers, i'm going to ask you what everybody is wondering. if you're watching on the internet, how is the system not going to crash. give us a glimpse into the future -- >> you haven't seen anything yet. the majority of video you will consume five years from now will be user created as opposed to content related. we did a router that did a billion phone calls, sold 6,000 of them.
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the problem will not be capacity of technology, the key is how do we consume it. if you get excited about that, you haven't seen anything yet. you look at what could happen if you connect the unconnected. and you begin to do this not just through video, but through common capability. in a plant, 50,000 ip devices. think what would happen if you could bring your loans out in a very unique way. back to a plug for president clinton which he does not need. he was the champion of the internet. he got how important it was to lead with this concept in 1992. he was the best spokesperson. >> no al gore? >> he helped a bit. but you haven't seen it. if you think that's a challenge, it gets more exciting. >> you haven't seen anything yet. good optimistic note to end on. thank you very much. up next, "what in the world." why some bad news for china is really bad news for many other parts of the world. i'll explain. tdd#: 1-800-345-2550 let's talk about low-cost investing.
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now for our "what in the world" segment. for the last few weeks we've been getting bits and pieces of news that add up to something big. china is slowing down dramatically. if it continues, it will have a profound impact on the rest of the world. gdp growth has dropped from about 10% last year to 7.6% in the latest quarter. now that might not sound like much, but it might just be the beginning like a dropping ball. we don't know if china has hit bottom yet. what we do know is that it will have widespread effects. look at two charts. the first is from brazil since the 1990s. the line in red shows how brazil's gdp has fluctuated around an average of 2.5%. now look at the blue line showing commodity prices.
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the correlation is pretty stark. when commodity prices rise or fall, the others move accordingly. another graph shows the same for africa. rates of growth closely track commodity prices. these prices in turn will increasingly track with china's growth. china imports these commodities. australia is another example. it used to be called the lucky country. this week it recorded the biggest straight deficit in four years. why? prices of iron ore and coal are down because of china slowing demand. china's unprecedented rise has brought with it a boon for resource-rich countries. as china's growth slows, the party is going to wind down. even the united states is not immune. i was struck by a report in "the wall street journal" this ek that said u.s. exports to china of coal used in steel making
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grew six fold in 2009. they grew six fold again in 2010. 600% rises. but as china's steel industry faces a loss this year, demand for u.s. coal has slowed. that's contributed to layoffs for hundreds of coal miners in the state of west virginia. thousands of miners will have their penguision and benefits reduced. all of these ripple effects lead back to china. to give you a sense of its important, look at the market for metals. according to the world bank, china's consumption of refined metals has jumped 17 times since 1990. its share of global consumption of these metals jumped from 5% to 41%. over the last decade, while china's demand has been growing by 15% a year, the rest of the world's has remained constant. china has essentially fueled global growth in these markets but now that china's appetite is waning commodity prices will fall, indeed are dropping. oil prices dropping as well.
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china consumes 10% of the world's crude oil, but over the last decade, it has contributed to nearly half the global rise in demand. according to morgan stanley, china's appetite for oil has been increasing by 8% a year, this year it's growing just a third of that amount, 2.5%. now, if this slowdown is indeed the new normal for china as many economists suggest, it has immense ramifications. all of these countries that use it to balance their budgets, russia, venezuela, maybe arab states are all going to struggle. i don't mean to paint a picture of doomsday. despite china's slowdown, it will continue grow more moderate 6 to 7% in coming years. it's a rapid rate for what is now a very large economy, but it will mean the party is over for many countries and companies around the world and they will need to get used to a new
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normal. you'll hear from salman rushdie and what it was like living under a fatwa for a decade. up next, is al qaeda back? i will speak with michael hayden, former director of the cia. right back. new prilosec otc wildberry
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is al qaeda back? there are signs that an affiliate of the terror group played a role in the benghazi attack that killed ambassador stevens last month. how much do we have to worry about? michael hayden has run the u.s. intelligence agency under three presidents. he was appointed director of national security by bill clinton, and was in that post on 9/11. george w. bush later named him cia director, a job he left 23 days after president obama came into office. hayden is now adviser to the romney campaign. welcome back to the show, general hayden. >> good morning, fareed. thank you. >> there are two possibilities, one, that this is a bunch of bad guys, militants, that got lucky. the other is this is a systematic campaign perhaps directed by one of the major al qaeda affiliates, if not al qaeda central. you know, this is, in fact, a --
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you know, the execution of a long planned attack against the united states. which do you think seems more plausible? >> well, fareed, this is all fuzzy and it's just not fuzzy in our analyst. it's fuzzy in real life. if you look at al qaeda, i'll give you three tears. -- tiers. you've got al qaeda prime still in pakistan and the border. i think we both agree they are not what they used to be and probably never will be. then you've got the al qaeda affiliates in the arraign -- arabian peninsula and then the al qaeda inspired. frankly, i think this attack was conducted by a group that's on the edge between those second and third tiers. consistently inspired, probably not quiet quite a formal affiliate of al qaeda. and i think that's the new normal. that's what we're going to see an awful lot of. and so what we're going to see are attacks of this nature in many areas of the world against americans and american
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interests, but al qaeda's ability to pull off what they doctrinally really want to do, the mass casualty attack in the homeland against the iconic target. well, the probability of that now is very, very low because of what we've done over the last 11 years. >> when you look at these kind of al qaeda affiliates, and as you say, what you're describing, it's like they take the al qaeda brand. >> right. >> as opposed to having any kind of central direction or being an office of al qaeda, but when you look at these kinds of groups, does it worry you that what does seem to be a band of militants was able to attack an american government target? this has been something, again, they haven't been able to do really since -- certainly since 9/11, and if you go back to the attacks on our embassies in africa before that. why were they able to do this to an american -- a government building? >> well, fareed, i think of all the places on earth you could
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point to for al qaeda and western interests, benghazi is really a home game for al qaeda. tight home of the islamic/libya fighting grew. islamist militants have been there for a long time. they sent more fighters to iraq more than any other country during the war there. this part of libya is not under strong government control, and so in one sense, if this wasn't predictable, at least one can look at the circumstances and say this isn't exceptional, this is not unexpected. >> politically i want to ask what the dynamic here is. one thing that strikes me is that the difference this time around with some periods in t past is that you have an elected government in libya that has legitimacy as a result, that has not only denounced the attack but come out very strongly in support of the united states, seemed very determined to track down these people. you have an elected islamic
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government in tunisia denouncing the al qaeda attack. you have an elected president in egypt denouncing the attack. not as eloquently as we would have liked, but he did it. an elected government. in other words, for the first time you have a lot of people with street cred in the muslim world and in the islamic world saying, you know, this is bad, this kind of violence in the name of jihad is a terrible thing. does that change the dynamic, you think. >> yeah. it really does, and this is a really important point, fareed. it's both good news and bad news. let me quickly cover the bad news, all right? all the successor governments are weaker than their predecessors, and, frankly, they're less agile and adept counterterrorism partners for the united states. that's just a fact. this would not happen in a libya under moammar gadhafi. we've been very successful with
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american men would call a close battle, dealing with a jihadists that are already convince they'd want to kill us. we have not been involved in the deep battle, that's the production rate of them wanting to kill us in a year or five years. despite near term and medium term turbulence that this arab awakening that has created, it's set in motion a dynamic, it gives us the possibility -- this is not a sure thing, that gives us the possibility to begin to have some influence on the deep fight, you know, the production rate of these folks who in a year or several years' time will be convinced they want to do us harm. it's very difficult, success is not guaranteed. but for the first time in 11 years, i actually have some hope about the deep fight. where we were decidedly unsuccessful before the arab awakening. >> mike hayden, always a
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pleasure to talk to you. thank you so much. >> thank you, fareed. we'll be back. >> everyone who loved me, said what the hell are you doing? have you lost your mind? i thought, you know, actually. maybe, actually. [ male announcer ] citi turns 200 this year. in that time there've been some good days. and some difficult ones. but, through it all, we've persevered, supporting some of the biggest ideas in modern history.
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how do you live knowing that the world's most powerful islamic cleric wants you dead? salman rushdie lived under a fat was, -- fatwa, an eed ikt threat of being killed. it's all because of a book he wrote, "the satanic verses." did you think you were going to die? >> at the very beginning of it, yeah. when i first heard about it, i thought almost certainly because i knew the nature of the beast, you know. i knew there had been assassinations carried out in europe of the supposed opponents
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of the regime. so it was a thing that they did, and they saw it as a legitimate extension of their rule. >> and you couldn't have imagined that you would get, i'm guessing, the kind of protection that would allow you to be safe. i had no idea what i would get if anything. the whole thing was unimaginable. it put me in a position where i literally didn't understand the shape of my life anymore and then i thought there probably isn't much more life to understand the shape of. >> people forget, nobody knew quite what to do. this was one of the first episodes of this kind of fatwa, muslim rage. and there wasn't very strong support from governments, even margaret thatcher was somewhat
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ambivalent? >> to be fair to the conservative government, they did support the police offer of protection and that was maintained throughout the period, you know, so, yes, sort of bedrock level. making sure the british citizen was protected, they did do that. but i mean it was well known that i had not been a supporter of the conservative government, you know, and i had written sort of satirically about it often and nonsatirically. i had written op-eds a lot. some of that satire is in "the satanic verses." so it wasn't a novel that endured itself to that then ruling group and they think maybe somewhat reduced their energy to solve the problem. >> like margaret thatcher never made a ringing speech about -- >> no she didn't. some of her senior cabinet ministers said extremely rude things about me. douglas hurd who was then the foreign secretary gave
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interviews in which he said i was a very unpleasant person which i don't know how he knew because he never met me. i mean i literally never met him. he was prepared to say that. i remember there was an interview and he was asked what was your most painful duty in office and he said reading "the satanic verses." >> i heard you got a bad review. >> douglas said himself one of the crappiest novelists on earth. jeffrey powell, then home secretary, within days of the fatwa, he said, i've never forgotten, he said the british people have no love for this book. it compares britain to nazi germany. which is astonishing remark. >> and not true. >> i'd pay a million dollars to somebody who can show me where in the novel it does anything remotely like that. it is true it is not polite about the thatcher government but that's a little bit of a step away from comparing it to
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the nazis. >> talk about the period when people prevailed upon you to make an apology. i can understand the pressure. you know, if somebody says to you, look, if you say this, it will all go away, describe what you were thinking. >> there was that. that was the carrot if you like. there was also the stick, which is that a lot of people in the british media and public spokespeople, commentators in the newspapers and politicians were essentially saying, you broke this, you fix it. so i allowed myself to be suckered into this compromise, you know, in which i was supposed to make some declaration of adherence to the islamic faith, which i did, and it wasn't true, first off, because i've never been a religious person. i wasn't then. i'm not now. so it was the one time, i think, that i really agreed to, you know, sort of push myself into a position of telling a lie. for a good motive, to try and solve the problem.
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but nevertheless. >> and it didn't work. >> a, it didn't work. and b, it did something else, it disgusted me with myself. literally my body knew it before my mind. i came out of the meeting and i was physically sick. and everybody who loved me said what the hell are you doing, have you lost your mind, and i thought, you know, maybe actually, maybe. when i came to my senses, repute ated what i said, apologized for having said it, regained my honest self if you like, it also clarified something for me. you know, it really made me feel you're never going there again. enough with compromise, apology, appeasement.
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enough with giving into, with letting this other side set the agenda, you know. i know what i believe in, i know what i'm standing up for, you find out what they're like. this was a moment like that. it was a kind of shipwreck. and i found out what people are really like because they revealed themselves. >> salman rushdie, thank you for being with us. we will be right back.
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despite president ahmadinejad's claims to me last week that iran's economy is not in chaos, there was chaos in tehran this week when shocked people protested the ria. anyone with $25 to their name is a millionaire in iran. that brings me to my question of the week, what is the largest denominated currency note ever issues? is it, a, 500 billion yugoslavi yugoslavian, b, 100 trillion zimbabwe dollars, c, 100 quinn till onhungarian or d, 100
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sextillion. this week's book of the week is "the parties versus the people" by former republican congressman nicki edwards. if you worry about partisanship or gridlock, you need this book. he has some smart proposals that will pull america off the ledge and give politicians incentive to make american government work. now, for the last look. like chess pieces around the world are monument after monument. there's the last aztec ruler to world heroes, ghandi, christopher columbus, abraham lincoln and the latest statue to go up is alia. you might ask yourself who? he was the tehran leader of
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bejan until he died ten years ago. his son, who is currently the president, spent 5 million of the nation's riches to build some parkland. it is now called abijan park and that's where the statue sits. you will see while this is a first statue of alia in the americas, some of the statues have already congrequered easte europe. perhaps this is coming to a park near you. the answer to the gps challenge is c, hungarian 100 quintillion. thanks to all of you for being part of my program this week. i will see you next week.
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hello, everyone. i'm fredricka whitfield with a look at our top stories right now. it's election day in venezuela and people are going to the polls to vote for their next president. in new orleans, venezuela nationals lined up to vote in the early hours of the morning. chavez is hoping to hold onto power but he's facing a strong challenge from his 13-year rule from his opponent. it's a big week for candidates in this country. president barack obama is hoping to build momentum from that lower unemployment rate to hold a fundraiser in los angeles today, then eahe's heading to ohio. mitt romney is rallying in florida. he's giving a major foreign policy speech tomorrow. we're following a shooting on the campus of the university of south alabama. a student

Fareed Zakaria GPS
CNN October 7, 2012 10:00am-11:00am PDT

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